Market Overview

Brexit

How are markets reacting?

The GBP/USD currency pair dropped 67 basis points and is sitting on 0.90280 at time of writing. The EUR/GBP currency pair is trading 92 basis points higher at 0.90261.

Our view is Theresa May is merely delaying the inevitable.

The Chinese Yuan has started weakening again

Trading Log

Moving forward I will include a trading log as part of my writing. The purpose of this activity is to gain a better sense of the price action of the market as it relates to my emotions in the market. My to gain a better understanding of the impact of markets on my emotions.

Why do I have such strong impulses to sell when the correct decision would be to buy and vice versa? It’s quite easy to lose track of your emotions while trading.

A lesson I learned recently is that I don’t always need to be trading. I’ve found that 90% of my time is better spent observing the market, researching, and doing pretty much nothing. I’ve discovered that I make my biggest mistakes when entering trades at the wrong time, mostly early. For example, after I conduct my research and open a position, I find I have difficulty maintaining my original reason for entering the trade initially, so when the trade starts to go in the wrong direction I begin to allow new ideas to pop into my head that eventually convinces me I’m wrong, even if I’m still right. It’s quite confusing.

Wednesday, November 7, 2018

Daily Writing

9:21 AM

Crude oil has undergone steep declines over the past few weeks. What is the reasoning behind this? The U.S. Dollar index has started to show weakness over the past several weeks as well. According to experts, the weakness in the U.S. dollar index was expected after mid-term elections reflecting skepticism that the stimulus bonanza, including further tax cuts, that had fueled the dollar’s rally in the first half of the year, would continue under a split congress.[1]

We are eagerly awaiting two new developments from the UK and Europe in the coming days and weeks. Theresa May has ordered a push for a Brexit deal this week, ordering her attorney-general Geoffrey Cox to prepare a legal solution that would unlock an agreement between the UK and Brussels. We are keeping an eye on the impact of this week’s development on the GBP and EUR.

The second major development in Europe is also set to play out over the coming days. The Italian government has until November 13 deadline to submit a re-drafted budget proposal to the Eurogroup.[2] We don’t really see an easy resolution here, as “Rome’s populist government is standing firm ahead of a November 13 deadline to rewrite plans or escalate its stand-off with Brussels.”[3]

Something new to consider: the price of Uranium hit a 2.5 year high on November 5. Uranium has been one of the best-performing commodities of 2018, rising more than 40% from its April lows.

According to data recently released by the People’s Bank of China (PBoC) in October, the central bank’s foreign exchange reserves dropped by roughly $32bn on account of China’s push to strengthen the renminbi in the face of potentially disastrous devaluation. The PBoC is also intent on maintaining foreign currency reserves above $3tn, as these reserves serve as China’s means of suppressing the value of the renminbi. Official foreign exchange reserves fell to $3.05tn by the end of October from $3.087tn a month earlier. China’s forex reserves peaked at just under $4tn in mid-2014, but in the following two-and-a-half years the PBoC burnt through nearly $1tn to prop up the renminbi amid a capital outflow surge.

[2] The Eurogroup is the recognized collective term for informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 members.